Many homeowners may be keen to sell their house and build their dream home instead but navigating the finances can be tricky especially if the market rates or the economic situation is not in your favor. There can be a number of decisions and questions on the homeowner’s mind about how they can bridge the gap between selling their home for a good price and building a new one that is more functional and practical for their needs.
- Don’t Make A Down Payment Just Yet
When an individual is ready to radically change their life, they may become more impulsive. While buying a home is rarely an impulse buy, you may find a home you feel is perfect for you or the right plot of land and be anxious to put a down payment on it.
Financially speaking the most sensible thing to do is to ascertain your personal cash flows, assets, and liabilities especially if your current home is still on the market and has not been sold. Getting cash home buyers for a house usually requires a bit of leg work such as effective marketing, repairs, and renovations so make sure your finances allow for those extra expenses.
The following factors should be on your mind before you tie up your liquid cash and potentially take a loan to put a down payment on a new house:-
- Do you have an understanding with the potential buyer for a contingency that would give you time to clear the formalities before you assign them ownership?
- Do you have enough money to live comfortably for at least 6-12 months including as far as rental accommodation is concerned? (This is more relevant if you or your spouse are recently unemployed or between jobs or haven’t found your dream home yet).
- A major transition such as selling one property and moving to or building another can be a huge financial risk especially if you do not have other property holdings or assets that can be used as securities for large loans.
- Secure The Finances For The Job
Meticulous financial planning is vital when you want to put a down payment on a new property or land. Here are a few ways you can secure the finances needed to make your transition easier.
- Utilize assets you may have, changing homes is when you should consider selling a lucrative asset. You can also generate a rental income if you own an apartment etc. Assets can also be used for home loans as they count as leverage or security for the bank if you sign them over.
- Home equity is another option although you’ll have to keep your current home unsold in order to secure it. Meanwhile, you will be able to get started on your new home with the best local contractor you can find such as Pittsburgh custom home builders who can bring your vision to fruition.
- Secure a gift of money from a friend or relative as there are ways to keep this money out of the tax net.